Federal funds kept Mesa neighborhoods afloat

Here’s how things have played out for Mesa’s efforts to spend nearly $14 million in federal grants under the Neighborhood Stabilization Program.

Summer 2008: As the nationwide foreclosure crisis spirals out of control, President George W. Bush signs the Housing and Economic Recovery Act of 2008. Among other things, the law makes $3.9 billion available for cities to buy, rehabilitate and resell foreclosed homes.

Fall 2008: Mesa applies for some of the money.

March 2009: Mesa is awarded $9.7 million in Neighborhood Stabilization funds and will use the money in the hard-hit 85204 ZIP code.

November 2009: After early problems acquiring properties because of uncooperative banks, the city has bought 15 homes and is spending about $62,000 each on rehab.

November 2012: With fewer foreclosed homes on the market, Mesa expands NSP target area to include entire city west of Gilbert Road.

August 2013: Mesa has bought 18 homes under NSP3, has about $1 million left to spend by March 2014 deadline.

PROGRAM INFORMATION

Administrator Ray Thimesch can be reached at 480-644-4521 or ray.thimesch@mesaaz.gov; information also is online at www.mesaaz.gov; click on “housing and community development” and then “neighborhood stabilization.”

By Gary NelsonThe Republic | azcentral.comMon Aug 26, 2013 12:01 PM

No one is likely to attach a historical plaque to a particular two-story townhouse in northwest Mesa.

Cute as it might be, it looks pretty much like any of the other 126 units in its complex, and there’s no record of anything historical happening there.

But 1535 N. Horne, No. 47, will have its little place in history, nonetheless, standing as testimony to Mesa’s fight to recover from one of America’s most disastrous real-estate crashes.

Crews were busy there this week, laying tile, applying paint and otherwise completely redoing a home that had fallen into the clutches of foreclosure. It’s typical for what the city has done with dozens of properties that suffered a similar fate, but it’s also among the last of such projects.

After almost five years, Mesa’s participation in the federally funded Neighborhood Stabilization Program is nearing its final stages. When it’s over, Mesa will have cycled more than $15 million into the program.

Over the half-decade since its inception, the effort morphed from an inner-city rescue mission into a campaign to help a much wider swath of the city, even as the housing market moved into recovery mode.

The money came in two waves.

The first $9.7 million arrived in early 2009, a few months after Congress approved the program as the nationwide housing crisis spun into panic mode.

The money enabled Mesa to buy and rehabilitate 39 homes, which then were sold to income-qualified buyers who received subsidies and counseling as they stepped into home ownership. The premise was that fixed-up homes and pride of ownership would keep neighborhoods from slipping further.

It wasn’t easy at first. Banks weren’t used to working with cities trying to buy homes, and investors outbid Mesa for a lot of properties.

But as program administrator Ray Thimesch learned to deal with the banks, and they with him, Mesa’s efforts gained traction.

Under NSP’s Phase 1, Mesa also bought 10 multihousing properties totaling 33 units, which Mesa-based non-profits now use for their housing programs.

That first phase focused entirely on the 85204 ZIP code at the direction of a City Council worried that the central city was falling into a black hole of blight.

An additional $4 million arrived in early 2011 under NSP’s Phase 3. Thimesch held off spending that money while the feds crafted rules for how it could be used.

The City Council decided at first that some of the new money could be spent in a small area west of Alma School Road. But by the time Thimesch was ready to spend it last year, it had become harder and harder to find foreclosed homes in the designated areas.

“The market changed so quickly that the houses weren’t there,” Thimesch said. So, the council told him he could buy houses anywhere west of Gilbert Road.

The inventory has become more diverse, too.

In the program’s first phase, most of the houses Thimesch bought were older, smaller tract homes. Now, he’s buying bigger houses in more upscale neighborhoods, as well as a few condos and townhouses. In some cases, Mesa’s investment in a property, counting purchase and rehab, will soar well past $200,000.

The buyers won’t have to pay that much, however. People who make less than 50 percent of the Phoneix area’s average median income can get subsidies up to $30,000 in the form of no-interest forgivable loans.

To benefit fully from that, however, they have to stay in the property for 15 years. They also can get up to $5,000 in closing-cost assistance.

As Mesa sells homes, money is funneled back into the program, stretching it beyond the dollars originally allocated by Uncle Sam.

Only two homes remain to be sold from the first phase of NSP. A sale is pending on one, and the other — 1036 S. Miller St. — is listed for $142,500.

That’s a big reduction from the nine NSP homes that were available late last year, a situation that caused Councilman Alex Finter to ask whether the homes were priced too high.

Thimesch told Finter that the delay in selling homes was a product of complex processes under the federal program.

So far under NSP3, Mesa has bought 18 homes, two of which are still in closing. Some sales fell through because appraisals came up short of what the banks were asking.

Some of those houses will be coming up for sale within the next few weeks, Thimesch said.

The recovering market and declining inventory tell Thimesch that NSP’s days are coming to an end. “I do not expect any more NSP programs,” he said. “I think the market has changed enough that it’s not going to be an issue.”

At one point during the real-estate crash, the RealtyTrac website listed more than 1,500 distressed properties in the 85204 ZIP code alone.

Truth be told, Mesa and NSP were able to rescue only a tiny fraction of those. But Thimesch thinks the program helped plug a profusely leaking dike.

“I think it’s worth it if you’re looking at putting a potential homeowner into these things,” he said. “You do open up doors for a lot of people who would not have had that opportunity.”

“And,” he added, “it’s probably worth it to the neighborhood when you’ve got a homeowner in there rather than a renter.”

In many cases, he said, investors wouldn’t touch a neighborhood until after Mesa went in first with NSP money. And the investors often followed the city model of extensive rehabs rather than just making the cosmetic changes they previously would have settled for.

Apart from the effects of his program, Thimesch hopes Americans in general were chastened by the speculative fever that led to the housing collapse.

There never was a shortage of housing during the bubble, he said. It just seemed that way because of the marketing hype and gimmicks that agents used, such as making potential buyers enter lotteries to have a chance at landing a house.

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